Will Cryptocurrencies Be the Art Market’s Next Big Thing?

A selection of CryptoPunks, a collection of 10,000 characters with proof of ownership stored on the Ethereum blockchain.CreditCreditLarvalabs.Com

By Scott Reyburn

Jan. 13, 2018

LONDON — There’s a new gold rush. But this precious metal doesn’t actually exist.

The frenzy is for so-called cryptocurrencies — or encrypted digital money — and their value skyrocketed in 2017. The price of Bitcoin, the pioneer decentralized virtual currency, rose more than 1,300 percent last year, despite plunging 40 percent at one point in December. A Bitcoin rival, Ether, was up 8,000 percent. It is thought that the total worldwide value of cryptocurrencies could reach $1 trillion this year.

Bitcoin and its derivatives have, for the moment, proved too volatile and unwieldy for day-to-day transactions. Yet the cryptocurrency model, underpinned by decentralized blockchain ledger technology, is increasingly becoming a force in more specialized areas of the economy. The art world is one of them.

On Dec. 16, the nascent market for what might be called cryptoart appeared to reach a new level when the hitherto-unknown Distributed Gallery announced the auction of “Ready Made Token,” a unique unit of a cryptocurrency that the gallery said was created by Richard Prince using technology from Ethereum, the network responsible for Ether.

The online gallery describes itself as the first to specialize in “blockchain-based artwork and exhibition.” It invited bids for the work, starting at one Ether, equivalent to about $650 at the time. (As of Friday, one Ether was worth about $1,200, according to ethereumprice.org.) The timed auction ends on Monday.

The appearance of a crypto “ready-made” by an artist of Mr. Prince’s stature seemed to suddenly put blockchain on the art world map. Distributed Gallery even arranged for Mr. Prince to attend the inaugural Rare Digital Art Festival in New York on Saturday.

In fact, Distributed Gallery had no connection with the American artist. This virtual dealership and its “Ready Made Token” are instead a playful experiment devised by Olivier Sarrouy, a philosophy and sociology lecturer at the University Rennes 2 in France, along with three friends.

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Richard Prince’s “Ripple” paintings share a name with a high-rising cryptocurrency.CreditDavid Regen/Gladstone Gallery

“We were trying to explore how a cryptocurrency could relate to scarcity in the art market,” Mr. Sarrouy, 32, said in a telephone interview. “It reinterpreted Marcel Duchamp’s gesture of the ready-made in a radical way.”

But why Richard Prince?

“To make a ready-made we needed a signature, but we were no one in the art world,” Mr. Sarrouy said, adding that he and his friends had chosen Richard Prince “because he is the king of appropriation art.”

“Our artwork has been created by our own Richard Prince,” he said. “And then there is the famous Richard Prince.”

The appropriation of this name was certainly mischievous, given that the “famous” Richard Prince continues to be involved in a lawsuit concerning his appropriation of an Instagram-sourced photograph for a 2014 exhibition. Adding further confusion, Mr. Prince’s most recent show of paintings at the Gladstone Gallery was titled “Ripple,” which also happens to the name of a high-rising cryptocurrency.

Mr. Prince declined to comment for this column.

“The project is interesting,” said Judy Mam, an organizer of the Rare Digital Art Festival, referring to the Distributed Gallery’s Duchampian token. “But we’re talking about people who are putting up money,” she added. “That’s when the theoretical aspect of the project comes crashing down.” It no longer features in the festival program.

As of Wednesday, Distributed Gallery’s auction had attracted four participants, who bid in Ether up to a value of about $2,600. Three bidders who thought they were competing for a work by the “famous” Mr. Prince have received or are in the process of receiving a refund, according to Mr. Sarrouy. “The last one has bet knowing what this project was all about,” he said, “and is still the highest bidder.”

Meanwhile, delegates at the Rare Digital Art Festival planned to discuss how to take memes and the other infinitely copyable stuff of the internet and turn them into “rare, tradable blockchain assets.”

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The “Ready Made Token” by “Richard Prince” is being offered by the Distributed Gallery in an online blockchain auction.CreditThe Distributed Gallery

Since late November, the most spectacular proof of this concept has been CryptoKitties. These cute virtual felines have a collectibility — and tradeability — that has attracted more than 235,000 registered users and more than 37,000 Ether, or about $52 million in transactions, according to the company. Cryptokitties.co charges 3.75 percent every time a cat “breeds” with another or is sold in its own marketplace. In December, one of the 100 “Founder Cats” traded for 253.3368 Ether, equivalent at the time to about $111,000. (It would now be more than $300,000.)

Mack Flavelle, co-founder of CryptoKitties, which is based in Vancouver, British Columbia, thinks that digital art could be a major beneficiary of the explosion in virtual wealth.

“There’s not that much that people can do with cryptocurrency,” said Mr. Flavelle, 37, who planned to attend the festival on Saturday. “We gave them something fun and useful to do with their Ethereum. It’s early days, but this could happen in the blossoming art space as well. The blockchain is an entirely new medium for art.”

Matt Hall and John Watkinson, creators of CryptoPunks, also plan to be at the festival. CryptoPunks are 10,000 unique algorithm-generated characters, 9,000 of which were given away in June 2017 for collecting and trading on the Ethereum platform. Coveted “punks” are now selling for 10 Ether, or about $13,500 as of Wednesday, lifting the investment value of the founders’ retained 10 percent.

Being pegged to cryptocurrencies, digital collectibles have risen (and fallen) in value at a far faster rate than just about everything in the analogue art world. They can be bought for a few dollars and sold for nominal fees. There’s no need to enter the intimidating world of galleries and auction houses to acquire them. True, the buyer doesn’t get to own a physical work of art, but then consumer research increasingly reveals that millennials are less hung up about possession.

“If you can create a market for kittens, you can do it for digital art,” said Anders Petterson, author of the Hiscox Online Art Trade Report. “Millennials are comfortable with this kind of technology. There is the potential to open up an entire new ecosystem outside the traditional art world.”

Plenty of people think cryptocurrencies will collapse under the weight of financial speculation. But if they don’t, they might just turn out to be the art world’s big game-changer.

Correction:

An earlier version of this article misstated the dollar value of 37,000 Ether. It is about $52 million, not $52 billion.